Failing Health Care Co-ops Will Cost Taxpayers

Consumer Operated and Oriented Plan Programs (COOPs) were really a political compromise between Members of Congress who wanted a public plan option and those who didn’t. Once the Affordable Care Act passed, COOPs had outlived their usefulness. However, they are now failing and will cost taxpayers plenty. Senior Fellow Devon Herrick testified before a congressional committee.

Introduction

A bedrock principle upon which the United States was founded is private property ownership as the ultimate guarantor of individual liberty and prosperity. Yet, more than 40 percent of the land is owned by government. Leaving aside federal office buildings and military bases:

The federal government owns and controls more than 650 million acres, totaling more than 29 percent of the land in the United States.1

These lands include more than 83.6 million acres managed by the National Park Service, 193 million acres managed by the Forest Service and 258 million acres controlled by the Bureau of Land Management.2

More than 96 million acres are set aside in national wildlife refuges supervised by the U.S. Fish and Wildlife Service.3

"The federal government manages public lands poorly."

The government owns some of the nation's most magnificent landscapes and treasured resources but it also owns some lands with no particularly striking characteristics or special environmental value. It also manages other natural resources, like ocean fisheries. Unfortunately, the federal government has managed the public's natural resources as poorly as it has managed the federal budget. Unable to balance land use and preservation, government management of public lands has shifted between periods of exploitation or overuse and periods of "protection" or "preservation" bordering on neglect. The result of both has been degradation of the public lands and the wildlife that depends on them. Government efforts to regulate ocean resources have been even more schizophrenic, simultaneously subsidizing the fishing industry while imposing restrictions to halt declining fish populations.

President George W. Bush has promoted the concept of the "Ownership Society" as a solution to a variety of public policy issues including health care, housing and retirement. The idea behind the ownership society is that the welfare of individuals (and thus the nation) is best served by and directly related to the ability of people to control their own lives and pursue their own goals. After more than a hundred years of federal management of natural resources and legislative dominance of environmental law, it is time to re-explore the extent to which ownership can improve the environment.4

Garret Hardin provided a modern economic analysis of the idea that public ownership of natural resources leads to poor management and environmental degradation, using the example of herders who share common grazing land.5 Herders who overgraze commonly-owned land reap all the benefits. Yet all herders share the cost of the resulting land degradation, whether or not they contributed to its cause. Consequently, herders who overgraze bear only part of the cost, while herders who resist the temptation in order to protect the land bear the immediate cost of their forbearance, but realize only a fraction of the benefits. This is because the benefits of their good behavior (long-term preservation) are shared by all herders, not just those who act to preserve the land. Indeed, their selfless actions may have no effect on overgrazing - except to increase the share of the common pasture available to the others. Everyone, therefore, faces perverse incentives to overgraze. To the degree that they act on those incentives, environmental destruction results.

Public lands are also a commons, facing the same problem many other valuable common-pool resources face: overuse. Public commons are controlled through the political process, leading to disparate, sometimes contradictory and shifting goals for their management. As a result, public land managers are often rewarded for making what others perceive as perverse decisions.

"Private owners could solve environmental problems on public lands."

This study will show that many of the environmental problems faced by public lands can be solved through a property rights approach. The environmental management of resources for which strict private property rights cannot be established due to technological or political reasons can be improved by creating new markets or economic incentives.

A previous NCPA study, "Protecting the Environment through the Ownership Society - Part One," applied this concept to agriculture subsidies, subsidized flood insurance and the Endangered Species Act.6 It showed how government programs and policies, some instituted more than a century ago, are causing environmental harm. In Part Two, the analysis is extended to government ownership and management of public lands and to ocean fisheries.